Council weighs tax levy options

Delaware City Council held a work session meeting on Monday to discuss recommendations from the city’s Finance Committee to send a proposed income tax increase to the ballot for consideration by voters.

The discussion served as a continuation of talks stemming from the recommendations of the Delaware Financial Review Task Force, which presented its findings to the council in January after a nearly yearlong study of the city’s financial standing and projections. During that presentation, the task force delivered its primary recommendation of increasing the city’s income tax rate from 1.85% to 2.25% in order to generate an additional $6.3 million to address the coming budget shortfalls while also allowing for a sustainable capital improvement program.

Under the proposed increase, the credit for those working outside the city would remain at 0.50%.

In April, after allowing for a 30-day period for the public to weigh in on the task force’s findings, the council formally accepted the task force’s report as the Finance Committee dived further into the recommendations made in the report. The committee met six times since February before ultimately voting to recommend the tax levy to the council during its May 17 meeting.

“All we can do is go to the voters and put this on the ballot,” Vice Mayor Kent Shafer said to begin Monday’s discussion. “It’s up to the voters whether they want to invest more money in their city or not. It’s obviously not a recommendation we take lightly, but we’ve come to the conclusion that there are really no other options.”

Following Shafer’s opening comments, City Director of Management, Budget, and Procurement Alycia Ballone delivered a presentation to break down what the increased tax rate would mean for the city. According to Ballone, the current income tax rate of 1.85% currently generates $37.8 million yearly for the city. Of the $37.8 million generated, approximately $14.3 million (0.7%) is allocated for fire and EMS services, $3.1 million (0.15%) is allocated for payment of the city’s recreation center debt, and $20.4 million (1%) feeds into the city’s General Fund.

Should the tax increase be presented to and approved by voters, the city anticipates generating a total of $46 million in income tax revenue. The voter-approved allocation of the funds would remain at 0.7% for fire and EMS services while increasing to 1.55% for the General Fund. Ballone said the proposed allocation would convert the existing 0.15% going to recreation center debt to other funds by repealing the existing 0.15% income tax levy devoted to debt service.

“We think we could pay that debt off and use that funding more towards park and recreation operations and capital projects, so that’s why you would see a General Fund level of 1.55%,” she told the council.

As part of the proposal, Ballone said the council would be asked to act at an ordinance level to further allocate money from the funds marked for the General Fund towards specific uses. Those allocations would include 0.15% — approximately $3.1 million — going to the Parks and Recreation Department, 0.15% for street repairs and improvements, 0.15% for the city’s capital plan, and 1.1% or approximately $22.4 million remaining in the General Fund to support capital initiatives.

As for the projected impact the increase would have on residents, Ballone suggested that for a median family income of $75,000, the cost would be around an additional $25 per month. She added that individuals under the age of 18 would no longer be taxed, and retirement income would continue to be untaxed.

Other recommendations include increasing the city’s investment in economic development to enhance Delaware’s economic base. The city currently contributes $75,000 to the economic development reserve fund, and the recommended contribution with the tax increase would be $750,000.

Ballone said of the reasoning behind increasing the economic development contributions, “We know people really want to see a change in the (tax) credit, but right now, we don’t have a strong enough withholding base to have that happen. So, we want to invest in economic development so we can increase that business space and then, hopefully, in the future, we could increase that credit.”

During the council’s deliberation, Councilman Stephen Tackett expressed doubts about the tax levy passing given the sizable margin by which the 2016 road levy failed and offered the alternative suggestion of adding a sunset clause to the proposal that would limit the duration of the levy before going back before voters prior to its expiration.

By doing so, Tackett said the city could then show residents what it’s been able to do with the additional funds and, perhaps, make it more likely residents would support a renewal of the levy at a later date.

“If a permanent tax increase fails like historically it has, then what?” Tackett asked his fellow council members. “Then things are going to have to start getting cut because we’re heading for the red, and we’re heading there very, very fast … A sunset clause doesn’t mean it’s done after that timeframe. It means that it goes right back to the ballot, and I think if we have good use of funds during that time, and we have a product to show to our people, I think it would work again in another five or six years.”

Mayor Carolyn Riggle echoed Tackett’s concerns, citing the permanency of the 2016 levy proposal as one of the primary reasons the campaign failed.

“It quite literally buys more time and makes it more digestible for the second time around,” Tackett added of a potential sunset clause.

Councilman Drew Farrell noted the education of the public on why the city desperately needs the additional funds will be a critical component of whether or not any ballot measure, whether temporary or permanent, succeeds.

Speaking in favor of proposing a permanent levy, Shafer later added, “I think we need to give the citizens of Delaware a little credit here. Everywhere I go, people tell me how much they love living in this city. And I think if the voters have the facts, a lot of them are going to (vote for a levy). Powell’s passed a tax increase, other cities have passed tax increases by informing the voters of what the needs are and letting them make an informed decision.

“We all agree the need for this funding is ongoing, and I think our job is to make sure the voters have the facts. I think a lot of our voters, knowing what we know, are going to support this levy.”

No decision was made on the type of levy the city will ultimately propose as the council elected to continue considering all options while receiving additional feedback from the community. The city must submit the ballot language to the Delaware County Board of Elections at least 90 days prior to it being placed on the ballot.

Should the council ultimately approve the proposed increase for placement on the ballot, voters would decide its fate on the March 2024 ballot with potential implementation beginning on Jan. 1, 2025.

Reach Dillon Davis at 740-413-0904. Follow him on Twitter @DillonDavis56.